Looking Back on 2015 and Forward into 2016
2015 was a stellar year of economic growth for Utah. Growth was consistent across twelve major economic indicators, including:
Nonagricultural employment
- Up 3.7% in 2015
- Up 3.1% in 2016
Average annual pay
- Up 3% in 2015
- Up 3% in 2016
Unemployment rate
- 3.7% in 2015
- 3.5% in 2016
Net migration
- 15,500 in 2015
- 18,000 in 2016
Nonresidential construction
- Up 42.9% in 2015 Utah’s Nonagricultural employment: Up 3.7% in 2015 Up 3.1% in 2016
- Down 20% in 2016
Number of new dwelling units
- Down 3.7% in 2015
- Up 5.5% in 2016
Residential construction
- Up 18.3% in 2015
- Up 7.6% in 2016
30-year mortgage rate
- 3.86% in 2015
- 4.42% in 2016
Utah home price index
- 7% in 2015
- 4.5% in 2016
Taxable retail sales
- Up 5.1% in 2015
- Up 4.7% in 2016
New auto & truck sales
- Up 4.4% in 2015
- Up 3.6% in 2016 Utah’s Residential construction: Up 18.3% in 2015 Up 7.6% in 2016
Utah exports
- Up 12.6% in 2015
- Up 5.5% in 2016
2016 is projected to be another good year though some areas will see more growth than others. We’ll be focusing on the five most significant areas.
Nonagricultural Employment
Utah ranked in the top three states nationwide for relative job growth, seeing a 3.7% increase. Adding 49,000 jobs in 2015, Utah ranks twentieth in total jobs increase and twenty-sixth in labor market size with 1,377,000 jobs.
Utah County led the state in relative job growth with an almost 6% increase. In pure numbers, Salt Lake County was ahead by adding 20,000 jobs to Utah County’s 12,000. Davis County was third with 3,800 new jobs.
25 of Utah’s 29 counties saw job growth in 2015. Job losses were concentrated in energy-producing counties:
- Down 9.5%
- 1,451 jobs lost
- Down 14.9%
- 1,439 jobs lost
- Down 5.8%
- 191 jobs lost
- Down 0.3%
- 30 jobs lost
Job growth for the state is projected to slow to 3.1% this year for 43,000 additional jobs, compared to the 49,000 jobs added in 2015. This projection follows both national and global trends.
- A slowing economy in China, due to reduced demand for exports from Japan, the European Union, and Korea.
- Skyrocketing real estate debt in China, along with falling housing prices.
- Dropping oil prices have been hurting, rather than benefiting, the worldwide economy. Reduced oil prices contribute to political unrest in countries where oil production is a significant part of the economy, e.g. Nigeria, Brazil, and Russia.
- Significant levels of U.S. corporate debt may be a problem for some companies if the economy slows and revenue drops.
- A slowing U.S. economy.
- Fourth-quarter GDP rose by just 0.7%.
- Consumer spending and nonresidential investment have dropped.
- Consumer spending is projected to shrink this year.
Despite these indicators, the U.S. economy will grow in 2016 and outperform most developed nations. National unemployment rates are projected to drop below 5%, the first time in seven years.
Demographics
Utah’s net in-migration averaged just 6,500 people a year from 2010 to 2014. That number more than doubled in 2015 to 15,500 people. 2016 is estimated to see that rise to 18,000 people.
Net in-migration corresponds directly to demand for additional residential units. This jump is great news for the housing sector. Given that the average household size is three people, net in-migration led to an increased demand for 5,167 residential units in 2015. For 2016, it’s projected for the demand to increase to 6,000 units.
Construction
Nonresidential construction jumped 43% in 2015, topping out at $2 billion. Office and industrial development were at their highest levels since 2007, at $413 million and $490 million respectively. Lehi claimed 30% of Utah’s office development last year.
For 2016, nonresidential construction is projected to drop 20% to $1.6 billion. This is due to a significant boost 2015 saw from HollyFrontier’s $216 million refinery expansion in Davis County and solar farms in Iron and Beaver Counties seeing $200 million in solar farms built out.
Residential construction dropped slightly in 2015 (down 3.7%). Forecasts for 2016 call for an increase because of an increase in net in-migration and a healthy job market. The drop in 2015 happened because of a decline in the development of apartments, condominiums, townhomes, and twin-home units. Single-family construction jumped 12% last year, but the number of units (9,744) was still less than half of 2005’s peak (21,000).
Housing Prices
Utah’s home prices rose 7% during 2015 and are forecasted to increase an additional 4.5% in 2016, according to the Federal Housing Finance Agency (FHFA). Median home sale prices rose 6.6% to $245,000, according to the Wasatch Front Regional MLS.
Utah’s housing opportunity index was 58 in 2015, based on the median household income of $60,922 being able to afford 58% of single-family homes sold that year. This marks Utah as an affordable housing market by having an index number above 50. The median home sales price in Utah (adjusted for inflation) is almost 7% below 2007’s peak of $265,000. Housing prices are expected to recover fully by 2017.
Retail Sales
Retail sales rose by 5% in 2015 to $27.5 billion, less than $100 million away from 2007’s peak of $27.6 billion. This suggests Utah consumers are confident in their economic situation.
2016 sales are projected to remain almost as high as 2015’s, marking a nine-year recovery from the 2008 recession. This is also in spite of Internet sales drawing off nearly 8% of sales nationally since 2008.
Much of the current strength in retail sales comes from high auto and truck sales. 118,500 vehicles were sold in 2015, an all-time high for the state. 2016 is projected to rise another 3.6% to 122,800 vehicles.
For more indicators, please check out Cushman & Wakefield at comre.com